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10.5 percent and counting

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Stocks opened sharply lower on Thursday and Macy's largest one day percentage drop ever seemed to set the tone for a negative day of trading, but those relentless bulls jumped in to buy the dips, giving us some flashbacks to the 2017 bull market. The Dow, down 175-points at one time, closed with a gain of 123-points while we saw gains of about a half percent in many indices.

Daily TSP Funds Return

The Fed again put investors at ease about rates, but did state that they plan to continue to tighten that balance sheet. Historically a tightening of the balance sheet has led to a choppy stock market. It gets done a little more behinds the scenes and we don't get big announcements like the interest rate changes.

Retail took a hit yesterday, although it closed well off the lows with the rest of the market, but the retail index is stalling at the 200-day EMA and the descending resistance line. Is this another lower high being made, and more importantly, does that mean the trend is going to continue and we'll see another visit to the old lows and a lower low?

Trading volume was light yesterday and the momentum now seems to be a product of the herd mentality, but as always, the last ones in, or the last ones out on the downside, are the people who are more likely to be late to the show, and it's usually the mom and pop type investors rather than the big money or smart money. The light volume may be showing that now.

Earnings season gets into gear next week with some important bank reports. Expectations have been lowered, which gives opportunity for better than expected results, but the concern is bout who is going to give negative guidance because of the tariff uncertainty as we saw with a few companies already, including Apple's big one to start the year?

Watch the action in France over the weekend. There's rumors of the protestors there making a run on the banks - withdrawing massive amounts of cash. I don't know if they have the numbers to do something like that, but it could be disruptive to their banking system if it works.

The S&P 500 / C-fund posted a positive outside reversal day after the weak open and strong close. It remains in that narrowing channel or wedge-like formation, and it is closing in on that 50-day EMA. Whether that holds or of it will eventually move up to test the 200-day EMA, I don't know, but it has rallied 10.5% off the lows and surely it may need a little rest.

The DWCPF (small caps / S-fund) pushed above its 50-day EMA but an old broken support line is now being tested and could act as resistance.

The EFA (EAFE Index / I-fund) also broke through its 50-day EMA this week, but the 62 level may prove troublesome. The dollar rebounded a little yesterday putting a little pressure on the price of the I-fund, and why it may have lagged slightly behind the U.S. index returns.

The High Yield Corporate Bonds were down sharply in early trading, but the Fed managed to turn that around as well, taking the stock market up for the ride as well. There are still several open gaps below on this charts after a very sharp rally off the lows.

The price of oil is at an interesting juncture after also rallying impressively off its lows. This, along with the high yield bonds, may be the tell for stocks.

The AGG (Bonds / F-fund) was down again and yields moved higher and the rising trading channel is at risk of breaking down. There's not a whole lot of support below so if bonds start to fall, it could happen quickly.

Read more in today's TSP Talk Plus Report. We post more charts, indicators and analysis, plus discuss the allocations of the TSP and ETF Systems. For more information on how to gain access and a list of the benefits of being a subscriber, please go to:

Thanks for reading. Have a great weekend!

Tom Crowley

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SPY (C Fund) (delayed)

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DWCPF (S Fund) (delayed)

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EFA (I Fund) (delayed)

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AGG (F Fund) (delayed)

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